Management and firm characteristics

Abstract

The research is about the corporate financing decisions based on capital structure theories, especial reference to static trade-off theory and practice of listed companies in Sri Lanka. The result provides mixed support for the notion that firms does trade-off costs and benefits to derive an optimal debt ratio. As a result, the findings that CFOs of listed companies in Sri Lanka consider different factors in trading off the costs and benefits of debt financing. The research finds no significant association between management and firm characteristics and static trade-off theories in corporate financing decisions. The conclusions drawn from this study were that the corporate financing decisions in relation to static trade-off theory differ from developed countries to developing country in many ways such as Sri Lanka. However, for corporate financing decisions in relation to static trade-off theory to have full impact on firm value like U.S.A and Europe countries, CFOs of listed companies in Sri Lanka should consider static trade-off theory that are in line with corporate financing decisions.